Bitcoin Finance Companies Outperforming BTC Through New Strategies
Bitcoin finance firms have shifted away from merely acting as passive holders of BTC. Instead, they’re adopting a fresh financial model, using traditional capital market tools like stock issuance and fixed-income debt, allowing them to surpass Bitcoin itself in terms of performance.
The main focus of this new approach is to elevate the shares per bitcoin (BPS) ratio. Rather than just tracking Bitcoin’s price, these companies are working to gradually accumulate more BTC over time for each unpaid share.
This accumulation leads to an increasing “BTC yield,” which is a return expected from Bitcoin units instead of fiat currency.
A notable example of this strategy can be seen with a company like MicroStrategy (NASDAQ:MSTR). They consistently engage in market (ATM) equity offerings and issue new shares when their stock is priced above its net asset value (NAV). The capital raised goes directly into purchasing more BTC.
This tactic enhances the BPS ratio, even if it results in nominal dilution for shareholders. To put it simply, each share is now backed by a greater amount of BTC than it was previously.
Such a strategy hinges on the company’s market capitalization being valued above what they actually hold in Bitcoin. If that’s the case, issuing stock allows the company to profit from short-term investors while reinvesting into BTC to benefit those holding onto shares for the long haul.
The bigger the market premium they enjoy, the greater the yield. This dynamic can lead to what some analysts call BTC-native outperformance.
In fact, for 2024, this strategy has so far produced a BTC yield of 75%. This means that if a share started the year backed by 0.001 BTC, by year’s end, it would need only a slight increase in Bitcoin pricing to be worth 0.00175 BTC.
Another layer to this model is leveraging debt. These treasury companies can borrow at low-interest rates, creating a gap for acquiring more BTC. For instance, if Bitcoin rises 20% annually, and a firm can secure loans at just 8%, they effectively gain an additional 12% in BPS growth.
When this leverage is used judiciously, with well-considered liquidation thresholds, it can boost BTC returns without exposing the company to short-term market fluctuations.
These methods—ATM equity issuance and strategic debt financing—transform finance firms into what analysts refer to as a “full stack Bitcoin yield engine.” However, critics tend to label these stocks as high-risk, pointing to their elevated market capitalization and NAV ratios.
Yet, within this framework, as long as the BPS yield matches or exceeds that of premium holders, long-term investors still stand to gain. In fact, a high NAV can facilitate more effective stock issuances, which further boosts BTC accumulation.
This contrasts sharply with altcoin treasury companies that generally rely solely on stock issuance and face greater risks owing to the unpredictability of their underlying assets.
As for Ethereum (crypto: ETH), financing companies in that sphere have yet to significantly implement debt strategies to grow their BPS. Some predictions suggest that emulating a similar strategy could ultimately enable them to retain about 10% of all ETH.
